NEW DELHI (Reuters) - India's exports of goods shrank by nearly a quarter in September from a year ago, falling for a 10th straight month and threatening Prime Minister Narendra Modi's goal of boosting economic growth through manufacturing.
India's economy, Asia's third largest, is mostly driven by domestic demand, but the country has still felt the effects of China's slowdown. Exports have dropped and consumer and industrial demand for imports has weakened.
Imports fell 25.42 percent in September from a year earlier to $32.32 billion. Exports stood at $21.84 billion, according to data released by the Ministry of Commerce and Industry on Thursday.
"We see no signs of revival in exports in the near future," said Ajay Sahai, director general of the Federation of Indian Export Organisations. "We will be lucky if exports could even touch $265 billion to $270 billion for the whole year."
Policy makers were nonetheless relieved, because the trade deficit narrowed to $10.48 billion last month from $12.5 billion in August as gold and oil imports declined. For April-September, the trade deficit shrank to $85.36 billion from $97.17 billion a year earlier, the data showed.
The country's trade deficit with China widened to $21.6 billion in the first five months of the current fiscal year, ending in March, from $20.3 billion a year ago.
New Delhi is worried that a recent agreement among United States, Japan and 10 other Pacific Rim nations, the Trans Pacific Partnership, will further hurt prospects for India's exports, particularly of textile and leather products.
India's exports to Europe fell 10.9 percent to $21.2 billion in first five months of the current fiscal year. Exports to the United States fell 3.8 percent to $17.5 billion, mainly because of a decline in the value of oil products and textile exports.
Weakness in industrial activity and trade and lower grain production has led the Reserve Bank of India to lower its growth forecast for the current fiscal year to 7.4 percent from the government's initial estimate of 8 to 8.5 percent.
India has cut interest rates by 125 basis points so far this year and boosted spending on public works. Economic growth still slowed to 7 percent in the April-June quarter from 7.5 percent the previous quarter.
Reporting by Manoj Kumar and Rajesh Kumar Singh; Editing by Malini Menon, Larry King